Fifth Avenue Retail Space in New York Fetches $1 Billion

A group led by Carlyle Group Thursday closed on the second half of its effort to sell the retail space in a prime Fifth Avenue building for a total of $1 billion.

The head of Carlyle’s real estate group, Robert Stuckey, said in an interview that the firm sold the retail condominium in 666 Fifth Avenue at a time when retail property in other cities offer more compelling returns. Mr. Stuckey said that, with rents on Fifth Avenue approaching $3,000 a square foot, cities like Boston and San Francisco offer a better potential return on investment.

“There’s more upside there,” he said. Carlyle’s partners in the deal included Crown Acquisitions and Kushner Cos.

Carlyle bought the retail portion of 666 Fifth Ave., which is home to Zara, Uniqlo and Hollister, for $525 million on the eve of the financial crisis in 2008, when many other real estate investors were skeptical that rents could climb with fear of recession looming.

In March 2011, Carlyle sold a portion of the space occupied by the NBA store to Spanish retail company Inditex, owner of Zara, for $324 million Vornado Realty Trust closed on Thursday for the rest, paying $708 million.

Mr. Stuckey said that Carlyle is looking at retail property on Newbury Street, a major retail corridor in Boston. It doesn’t have the same foot traffic or international draw as Fifth Avenue, but with ground floor rents asking $80 to $100 a square foot, there are compelling opportunities, he explained.

In San Francisco, Carlyle recently acquired a property on Market Street in an evolving neighborhood near Union Square. The private equity firm and developer Cypress Equities are planning a 250,000 foot project of retail, restaurants and a grocery store.

Mr. Stuckey said the site was attractive because the neighborhood’s population was growing and tax incentives have encouraged companies like Twitter to locate there. As a result, demand is increasing for retail space, he said.

Mr. Stuckey said Carlyle was able to raise the value of 666 Fifth Ave. by buying out tenants Hickey Freeman and Brooks Brothers and replacing them with high-paying retail tenants.